Q: I recently took a new job and received a substantial upfront bonus structured as a forgivable promissory note. My wife has filed for divorce and wants half the bonus. Since I'd have to repay the balance of the "unforgiven" amount if my registration is terminated before the end of the note, wouldn't she only be entitled to half of the amount that vests each year on my hire date, rather than half of the entire amount now? —S.M., Seattle

A: Divorce laws vary from state to state, but the main issue is whether your state classifies the bonus as a marital asset subject to equitable distribution. For tax purposes, brokerage firms—and, I believe, the Internal Revenue Service—treat these bonuses as deferred compensation. But, with regard to divorce law, I'd compare them to other compensation arrangements, such as stock-option plans. Many courts do not considerstock-option grants awarded as incentive for future services (as opposed to compensation for past services) as deferred compensation. However, this is not the ultimate determining factor of whether or not the bonus is a marital asset. Ascertaining the character of the asset merely helps assess how much of it, if any, is the product of marital labor.

The difference is that deferred compensation granted during the marriage is usually a marital asset because it's compensation for past marital labor. In contrast, an award given for future service is a marital asset only to the extent that the service is performed before the end of the marriage. In that case, the spouse is only entitled to the share that actually vested before the cut-off date (for example, the date the divorce petition is filed). The stock that vests afterwards is not considered marital property (though it might be income for purposes of alimony or child support). Your wife may argue that any bonus based on the book you created during the marriage was based on marital labor. But, since you received the bonus from a new employer, and there's no guarantee that your clients will move with you to your new firm, this argument may not be overly persuasive.

Q: I've recently heard from several clients who purchased an auction-rate security at other firms that they can't sell the security, even though they were told it was just as liquid as cash. I'm not all that familiar with these securities. Can you give me some insight? -K.F., via e-mail

A: In a recent Investor Alert, the Financial Industry Regulatory Authority said the interest rate (or dividend) in an auction-rate security varies, and is set through auctions for a specified short term, usually measured in days. Before each auction, investors can request to sell; hold at a specified rate; or hold at whatever new rate the auction establishes. Potential buyers then say how much they wish to purchase and the lowest interest rate they'd be willing to accept. The lowest rate that allows for the sale of all available securities in a particular auction becomes the interest rate for those securities until the next auction. Auctions can fail when there are not enough bids to purchase all the securities offered. In that case, current investors will continue to hold their securities and will generally receive an interest rate above market rates for the next holding period, up to any maximum disclosed in the offering documents. Some issuers may have also reserved the right to convert an auction-rate security into a fixed- or variable-rate security or to call the instrument at a certain price.

Alan J. Foxman, Esq., is an attorney with the law firm of Lavalle, Brown, Ronan & Mullins, P.A., in Boca Raton, Fla. His comments are not intended to be legal advice.